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Whaaaat?

Good Morning,

 

“Risk comes from not knowing what you are doing.”

 

Don't yell at me - that comment is from Mr. Buffett.  This one is too:

 

“If you aren’t thinking about owning a stock for 10 years, don’t even think about

owning it for 10 minutes.”

 

This year has been a good example of how badly "news" can screw you up.  After all, we have had a ton of garbage spewed into the airwaves - from everything terrible about Trump, to the gigantic wave of harassment scandals, to the North Korea lunacy, to tax-bill madness, to Fed-head chatter, two Cat-5 hurricanes, multiple massive wildfires and, of course, the thousands of "expert" quotes which serve to confuse anyone listening long enough.

 

Meanwhile, the markets went up.

 

And up.  And up.  Experts, talking heads, the media, bankers, strategists and investors were all perplexed at various stages and in varying degrees.  The end result?  Since it is outside of the scope of "normal" and "so close to the '08-'09 financial crisis", the go-to topic has been to call the top, the end - the "this is when it will all be over" chatter.

 

What did they miss?

 

Demographics.

 

Let's review the records:

 

 

 

Lots of record high closes, right?

 

Well, keep in mind, it's a bit of a misleading chart.  When the markets start on a high, 1 point higher is another record.  Hence a trending market to the upside could set a hundred records in a year with little problem at all.  My hunch?  One of those type years is likely ahead.

 

Let's see how this "tired bull" stacks up so far:

 

 

 

While the magnitude of the gain this year has been far from record-breaking for a calendar year, the consistency has been without precedent by several measures.

 

The tables above provide an overview of how strong and steady the market has been as the S&P 500 is in its second-longest bull market, the tenth-longest streak without a 10% correction, the fourth-longest run without a 5% decline, and the longest rally ever without even a 3% decline.

 

Let's be factual here - at some point the market luck will have a very tough period, and it will be ugly for a bit.  This has always been the case - the future is unlikely to be any different.

 

However, history has taught the consistent and painful lesson that trying to bet on "when" has been a VERY expensive effort.

 

We suggest instead a steady focus on the long-term forces of the Barbell Economy and Demogronomics.  It demands patience and discipline.

 

So Why Then.....

 

....is the mass audience still so afraid?

 

Over $10 trillion still sits idle in the bank, earning little and completely unproductive.  Bond offerings are sold in minutes, with lines waiting and competing bids keeping rates low world-wide - even as earnings and equity records are set.

 

Take a look - the latest shows it again:

 

 

 

Once again - what is fascinating here is the movement from one spot to another.

 

While the bullish sentiment levels remain extraordinarily mundane for record-setting markets (almost 65% are not yet bullish) - note that for every 1 that left the neutral camp and moved to the bullish camp this week, 3 went to the bearish camp.

 

Amazing.  Pray for it to continue.....and keep praying for a correction.

 

Seen another way:

 

 

 

The chart above is the same sentiment data with years of the weekly reports all connected.  The blue line is the sentiment - the red line is the S&P 500 overlaid on the same timeline.

 

The two orange circles and the pink line have been added to provide you a point of view.  The crowd feels today pretty much the same way it felt midway through 2009.  Check where the red line (the SP500) was back then, when sentiment was the very same level it is now.

 

Heck, even all the "bullish" reading spikes in the AAII data (blue line) all mark times where the stock averages were lower than where they are now.

 

Like the title says today - Whaaaat?

 

In Closing

 

'Tis The Season

 

Enjoy Time with Family and Friends!

 

Make no mistake folks:  The rare US Barbell Economy is upon us and is set to unfold for the next 30+ years.

 

Sit back and fasten your seat belts - it's going to be a wild ride.  Of course, there will be lots of stops along the way up this mountain where it will feel like the world is ending.

 

And change?

 

Well, let me suggest we see it this way - it's like Bachman-Turner Overdrive told us when I was a kid:

 

"You ain't seen nothin' yet..."

 

Remember.....

 

Patience and discipline.  In this game, the turtle usually wins.

 

The dirty little secret is this:

 

He/She who moves less wins.

 

Long-term thinking always wins out over short-term trading.  Worrying about the next setback sells lots of ads but makes almost no money for you.  History proves it.

 

Forget economics - think demographics.

 

It's the big picture.  It's the current under the emotionally-driven waves.

 

Demogronomics keeps us on the leading edge of that long-term direction - but it also demands a much larger, far more patient view of the economic elements at work.

 

Have a very nice Holiday Season Weekend!

 

Until we see you again - may your journey be grand and your legacy significant.

 

 

 

InvestingMike Williams